141-10
Universität Siegen
Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht
Volkswirtschaftliche Diskussionsbeiträge
Matthias Busse, Carsten Hefeker and Signe Nelgen
Foreign direct investment and exchange rate regimes
The paper uses a comprehensive data set with bilateral direct investment flows and establishes the influence of the de-facto exchange rate regime for FDI flows. We find a strong and significant effect from fixed rates on bilateral FDI flows in developed economies, but no significant effect for developing countries. There is thus no general and uniform impact of stable exchange rates on FDI. We provide several possible explanations for this difference.